‘Welfare for the wealthy’: Our $6.3b rort
While young Aussies struggle to get a foot on the property ladder, new research has found billions of dollars are going to pensioners who own properties worth $1 million - or more.
The bombshell analysis of social security data carried out by the Australian National University has revealed around $6.4 billion in age pension payments are going to more than 255,000 pensioners who own homes valued at more than $1 million.
And nearly 30,000 pensioners owned homes worth more than $2 million this financial year.
Most of those people live in up-market pockets of Sydney and Melbourne, and likely bought their home decades ago, well before the real estate markets of our two largest capital cities took off.
ANU associate professor Ben Phillips told news.com.au the problem of pensioners living in pricey homes had become "increasingly noticeable" in recent years.
"House prices have increased so much, not through any one person's planning, but now it's just the case that the median Sydney house price is around $1 million," he said.
"Pensioners who bought in well-located areas many decades ago now find themselves in houses worth a million or more.
"Generally, we don't think of pensioners as being wealthy, but when we include the family home, many have significant wealth."
Mr Phillips said there was the potential to "tap" that wealth, either by pensioners reverse-mortgaging their home to increase their standard of living, or by governments recouping some of the cost of the pension after the individual's death.
But he said any move on the family home was likely to be divisive, as it would affect the inheritance of the next generation.
"I would expect it to be very controversial, certainly among many older Australians. I'm sure it would be very unpopular and would be likened to things like 'death taxes'," he said.
"But with the ageing population and the age pension becoming an increasing pull on the budget, there's a solution that wouldn't hurt people's hip pocket."
Former senator for the Liberal Democrats David Leyonhjelm was one of many Australians who took to Twitter following the publication of the ANU analysis, branding it an "excellent expose of middle class welfare".
"Pensions should be exclusively for those who cannot pay for themselves, not to underwrite inheritance," he posted.
But according to Richard Denniss, the chief economist and former executive director of influential progressive think tank The Australia Institute, it is just one of many problems with Australia's wider retirement income system.
"There's nothing equitable about the system. Single, older women who don't own their own house are among the poorest people in Australia, while we give billions of dollars to those living in multimillion-dollar homes, not just via the age pension but also through superannuation tax concessions and of course franking credit refunds," he said.
"There's clearly no appetite to make our retirement income system fairer, but there does seem an appetite to make it less generous for the poorest people in the country - we've already lifted the age at which women can receive the age pension, and there are those planning to lift it further and slow its rate of growth, all the while simultaneously arguing it would be unfair to ever change tax concessions to super or franking credits refunds."
Dr Denniss said the high volume of pensioners holding million-dollar properties would likely come as a surprise to many, but that the exemption of the family home from the assessment of the age pension was "by no means" the most expensive or inequitable feature of our retirement income system.
"A fair system would look at all sources of wealth and income and all sources of government support, and provide the most support to the people in greatest need," he said.
"Unfortunately in Australia we provide far more support to some of the wealthiest retirees than we've ever given the poorest.
"Middle class welfare is rife in Australia. We don't just have middle class welfare, we have welfare for the wealthy."
He said the analysis would be particularly galling for young people struggling to get a foot on the property ladder in the face of ever-rising real estate prices.
"Young people are disadvantaged across the entire spectrum of government policy - we force them to buy private health insurance they don't use, we force them to contribute to super, they have to repay their HECS loans and they have to compete with people who negatively gear properties when they show up for an auction," he said.
"Most young people have got no chance."